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The Biggest Threat to Marketing's Role is Measuring Tactical Promotional Expenditure

3rd March 2015 | Malcolm McDonald, Stan Maklan, Peter Mouncey

Marketing Value Metrics Authors Argue That Marketers Must Measure More to Demonstrate Value

Marketing Value Metrics (9780749468972) The emerging technology-led economy has created both a tremendous opportunity and challenge for organisations and the marketing community. Indeed, an analyst for a renown IT think tank is quoted as saying that Marketing Directors will spend more on technology than IT Directors by 2017. How will we manage such investment responsibly? The biggest threat to marketing’s role in this new age is not being is not being out of touch with the digital world, but continuing with our self-destructive focus on the measurement of tactical promotional expenditure in an attempt to prove that marketers are not wasteful, self-indulgent and innumerate. Ever better metrics, more complex assessment systems will not change the underlying problem of marketing's perceived lack of accountability.

Our research at Cranfield shows that successful marketers make a major contribution to corporate wealth by understanding markets, doing proper needs-based segmentation, developing quantified value propositions, competitive analysis, portfolio analysis and managing market-place risk. The most common objective of modern commercial organisations is the creation of shareholder value that is sustainable. Providing shareholders with a total return, from capital growth and dividend yield that exceeds their risk-adjusted required rate of return for this particular investment arises from serving profitable segments of customers more effectively than can competitors. A failure to integrate the assessment of market strategy (segmentation, targeting and positioning) with traditional measures of performance prevents us from focusing marketing accountability on that which truly matters and generates wealth.

We find it inconsistent that, whilst organisations have formally constituted, board-level audit committees that are responsible for reviewing all the major business risks that they face, conducting comprehensive financial due diligence processes on any major acquisitions or strategic investments, most have nothing for evaluating the risks associated with their marketing strategies and associated valuable brand and customer assets to establish whether their marketing strategies create or destroy shareholder value. Indeed, intangible assets often represent the bulk of shareholder value.

Marketing Value Metrics not only shows how to calculate quantitatively whether marketing strategies create or destroy shareholder value, but also illustrates how to link marketing strategies, not just promotional activities, to revenue and profits. All of this is the result of years of industry-academic collaborative research at Cranfield University School of Management. This is book is not in the "show us the money:" one measure you need school, rather it builds a process of accountability and measurement that integrates customer and market strategies with segmentation, targeting, marketing planning and marketing activities to create a comprehensive and senior management perspective. It takes a C-suite, sophisticated approach to measuring the effectiveness of marketing that will enhance the quality of conversation in your organization about how well (or not) marketing is doing.

About the authors: Professor Malcolm McDonald is Emeritus Professor of Marketing at Cranfield School of Management, having formerly been the Marketing Director of Canada Dry. Peter Mouncey has over 40 years' experience in the field of marketing, and is a Visiting Fellow of Cranfield School of Management. He is also the Editor-in-Chief of the Market Research Society's International Journal of Market Research. Stan Maklan is Reader in Strategic Marketing at Cranfield University as well as an experienced marketer and consultant.

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